MEC: Track Business Forces $82-Million Write-Down

Magna Entertainment Corp. will record an $82-million non-cash write-down for the fourth quarter of 2003, but the company said there would be no operating impact on any of its racetracks.

In a Feb. 5 release, MEC said write-downs would be required for Gulfstream Park and the Maryland Jockey Club "in view of their disappointing financial results in 2003," and "despite management's expectation that these business units will show improvement and continue to be profitable in the future." MEC also said Remington Park, Thistledown, and its Oregon tracks produced operating losses last year, and fourth-quarter write-downs were necessary.

A write-down of the Bay Meadows racing license is required based on uncertainty regarding future renewals of the lease of the facility, MEC said. The lease has been renewed on a year-to-year basis in each of the last two years, and is scheduled to expire Dec. 31, 2004.

In financial statements for the third quarter of 2003, MEC noted it's considering a "major redevelopment" of Gulfstream. If a decision were made to proceed with the plan, an additional write-down would be necessary. The aggregate "carrying value" of the assets that would be demolished if the facility were redeveloped is about $21 million.

"Since our establishment as a public company in 2000, we have adhered to a strategy of acquiring racetracks and related assets that should allow us to achieve synergies and economies of scale, thereby improving the performance of the acquired businesses," MEC president Jim McAlpine said in a prepared statement. "At the same time, we are taking steps to restructure the pricing and distribution model that has evolved in our industry over many years. Our efforts to expand distribution and develop new distribution channels for our racing content include initiatives designed to achieve broader television distribution of racing, expanded use of in-home wagering technology, and greater international distribution.

"Each phase of our business strategy is moving forward, although some more slowly than originally anticipated. We are confident, however, that we have assembled a powerful stable of racing and entertainment assets, that we are making significant progress on many fronts, and that our longer term vision for MEC will be achieved."

In a Feb. 2 interview, McAlpine told The Blood Horse recent decisions tied to account wagering and rebate shops are part of the company's plan to restructure industry models so horsemen and racetracks can benefit.

MEC will announce its financial results for the fourth quarter and fiscal year that ended Dec. 31, 2003, on Feb. 24.